The supplemental budget adjustment

With the arrival of COVID-19 in Vermont, state revenues and expenses became volatile – the numbers not reliable enough for budget-building. The numbers have settled down, and House Appropriations has been able to begin work on two budgets: a supplemental budget adjustment for fiscal year 2020 and a first quarter budget for fiscal year 2021.

Both budgets need to be out of our committee very quickly, the goal being to have them through the legislative process and to the Governor’s desk by mid-June. Fiscal year 2020 ends June 30.

On Monday, May 4, we heard the administration’s proposal for the supplemental 2020 budget adjustment. All that week and the beginning of the following week, we took testimony, assessing the impact of the “adjustments” proposed by the administration. Areas affected included the Departments of Tax, Vermont Health Access, Mental Health, Children and Families, Environmental Conservation, and Liquor, the Agencies of Commerce and Community Development and Transportation and the Treasurer’s Office.

These adjustments, which we approved, do not negatively affect individuals or programs. These adjustments do cover the $52 million in General Fund revenues lost to COVID-19. But how to close out the year without a deficit when $143 million in deferred revenues is hanging out there? Drain our reserves? Attribute the deferred revenue to fiscal year 2020 regardless of its arrival in fiscal year 2021? Something else entirely? We considered the different options, mindful of the potential impact on our bond rating. Happily, we experienced the equivalent of a “deus ex machina.” There was an unexpected conversation involving people in our Joint Fiscal Office and the U.S. Treasury.

Vermont’s allotment of $1.25 billion from the federal CARES Act is in our State Treasury, in the Coronavirus Relief Fund. The use of that money is tightly restricted by federal “guidance” from the U.S. Treasury. Use of these funds must be clearly linked to the impact of COVID-19, and no part of the $1.25 billion can be used to replace lost revenue or to swap out anything originally appropriated in our most recently adopted fiscal year 2020 budget.

That unexpected conversation provided a first hint of flexibility. It gave reason to hope that we could “borrow” Coronavirus Relief Fund money as a “bridge.” We still do not know if we will be given permission or not. Whether we end up having to drain our reserves or are given the “green light” to borrow from the Coronavirus Relief Fund, once the deferred revenues are in, we pay back, to the extent possible with that revenue, whichever source was used. We could not opt to attribute the deferred revenues due mid-summer to fiscal year 2020. There have been rumblings that Washington may defer federal income tax payments until September, or even later.

The remaining concern was our COVID-related expenses which unquestionably fell within the federal restrictions, expenses attributable to fiscal year 2020 and not already covered by administration spending through the Federal Emergency Management Agency and other federal sources.

Of note, the largest portion of the Coronavirus Relief Fund, about 80%, is subject to legislative appropriations.

And so, we set about appropriating from that fund. The Judiciary needed $4.9 million. This included COVID-19 costs related to safe spaces for staff and participants in court proceedings, remote technologies and services for court users, and addressing the backlog of cases.

Higher education: The Vermont Student Assistance Corporation needed $5.1 million to cover the anticipated need of award applicants due to COVID-related income loss. The state colleges and the University of Vermont, respectively, needed $5,117,792 and $5,016,300.

These amounts covered refunds to their students for room fees and/or meal plans and parking permits. A special note, this $5.1 million, for the state colleges, has nothing to do with the “bridge” funding needed to carry them forward through the next school year. That will be addressed in the 2021 budget.

We brought the supplemental 2020 budget adjustment proposal to the full House on May 15. It passed second reading. Even though it did not pass third reading until May 20, House Appropriations set to work May 18 on the budget for the first quarter of FY2021.

More on that budget in my next article.

All documents discussed in committee throughout our deliberations are posted on the House Appropriations web page on the legislative web site. And for all COVID-related documents, visit the Joint Fiscal Office here.

Should you have questions or concerns, please do not hesitate to contact me by email at mtownsend@leg.state.vt.us or at mftownsend@comcast.net, by phone at 862-7404, at my home at 232 Patchen Road or on the street (from a safe physical distance in either case). We will see each other again on Saturday mornings at Duke’s once normalcy is restored. Stay safe, please. Be well.

Mark your calendars: There is another Zoom Legislative Forum coming up June 1.

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